The decline in the scale and quality of short-term settlement and the impact of rapid expansion on 2020 earnings performance the company achieved revenue of 12.3 billion in 2020,-12.5% compared with the same period last year, and realized net profit of 350 million,-35.9% compared with the same period last year, which was lower than we expected (570 million). This is mainly due to the increase in settlement, asset impairment and rapid expansion on the cost of the period. We expect the company to maintain its "buy" rating with EPS of 0.79,1.07,1.43 yuan in 2021-2023.
Slow settlement + asset impairment + expense expansion is a drag on earnings, performance reserves significantly thickened year-on-year development income-12.5% to 12.2 billion, settlement gross profit margin improved slightly, year-on-year + 1.3pct to 26.3%; inventory impairment + investment real estate impairment of real estate projects in Tianjin, Chongqing, Jiaxing and other areas together lead to asset impairment of 350 million It expanded significantly in 2020, with the expense rate from + 6.5pct to 11.8 per cent year-on-year, and minority shareholders' profit and loss as a share of net profit from + 9.6pct to 61.2 per cent year-on-year.
The profit support of the company comes from the investment income of 360 million generated by the revaluation of the equity value of some subsidiaries after the balance sheet. The outstanding amount sold by the company at the end of the reporting period was + 85.8% to 21.88 billion compared with the same period last year.
Sales continue to be the dark horse, and the investment focuses on "big cities and big transportation".
In 2020, the company achieved full-caliber sales of 53.3 billion, + 81.4% compared with the same period last year, and equity sales of 37.1 billion, + 93.0% compared with the same period last year. In 2020, it strategically entered 8 key cities such as Zhengzhou, Guiyang and Fuzhou, and the number of layout cities reached 33. For the whole year, the total price of land reserves increased by 53.58 billion, + 195.1% compared with the same period last year; the total price of new rights and interests increased by 25.25 billion, + 114.0% year-on-year; the ratio of land to goods increased from-12.5pct to 38.3%; and the investment intensity (equity amount) increased from + 6.6pct to 68.1%. At the end of the reporting period, the company accumulated 1634 million square meters of land under construction and the area to be built was + 76% compared with the same period last year, and the abundant value paved the way for sustained high growth.
Give full play to the advantages of financing and leverage ratio to expand against the trend
The company makes full use of the background of central enterprises and the advantages of group resources to counter the trend and leverage to maintain high-speed expansion. The loan balance at the end of the reporting period was 45.56 billion, which was + 122.9% year-on-year. At the end of the reporting period, the net debt ratio was from + 119.8pct to 204.8%; the asset-liability ratio excluding accounts received in advance was from + 0.9pct to 83.4%; and the cash-to-short debt ratio was from-33.3pct to 143.1%. The company extended the orange file under the "three red lines" pilot standard, making it clear that it would optimize the financing structure in the future.
It is optimistic that 2023 will step into the 100 billion echelon (full-caliber sales) and maintain the "buy" rating, taking into account the pressure of inventory impairment and the increase in the expense rate of the period caused by rapid expansion, we forecast EPS 0.79,1.07,1.43 yuan (1.08,1.41 yuan before 2021 and 2022) in 2021-2023, with reference to comparable companies with an average PE valuation of 6.2 times in 2021 (Wind consensus expectations). Taking into account the medium-and long-term realization of the company's high growth in land sales at the performance level and the coordinated support of the group's resources in the future, the company will maintain a 50% valuation premium and give the company a valuation of 9.3 times PE in 2021, with a target price of 7.35 yuan (the previous value is 8.10 yuan) and a "buy" rating.
Risk tips: industry policy risk, industry downside risk, business risk.